Candidates split on best way to treat Medicare

Where Obama, Romney stand: The differences behind the campaign rhetoric

October 18, 2012|By David LauterTribune Washington Bureau

Medicare poses knotty problems. Not only has the number of recipients increased, the costs per person have gone up as medical care has gotten pricier.

The Congressional Budget Office projects that Medicare spending will go up more than 6 percent a year for the next decade. That's why the most consequential disagreements between the candidates regarding federal spending involve health.

For Medicare, which covers about one-fifth of health care bills in the country, GOP presidential candidate Mitt Romney has embraced a plan offered by his running mate, House Budget Committee Chairman Paul Ryan, R-Wis.

Beginning in 2022, people entering the system would not be covered under the current open-ended entitlement but instead would receive what supporters call "premium support."

Seniors would get a fixed amount of money that they could use to buy an insurance plan. If the plan costs less than the government pays, they could pocket the difference. But if the plan costs more than the voucher, they would have to pay the difference. The options would include Medicare, but its cost might be more than the voucher level.

The key issue in such a plan is how much the government will pay. Romney would peg the value of the voucher to the cost of available health plans in different parts of the country, ensuring that at least two plans could be purchased by any senior. He has also said that lower-income retirees would get larger vouchers.

Romney also would raise the eligibility age for Medicare from 65 to 67.

Backers of premium support plans argue that they will hold down costs through competition. If seniors shop around, they'll choose the cheaper insurance plans, the argument goes. Consumers and their insurance carriers will have an incentive to push doctors and hospitals to forgo unnecessary treatments or expensive tests that help drive up costs.

Critics doubt that would work. Sick, elderly people may have difficulty picking the right insurance plan for their needs, a problem that exists in the current Medicare Part D drug benefit. And there is evidence that insurance companies could siphon the healthiest seniors from Medicare, leaving the government program with the most expensive patients to treat.

Ultimately, critics say, premium support will not hold down health costs, it will merely shift the bill from the government to elderly people.

President Barack Obama agrees with the critics. Instead, of relying on competition among insurance companies to hold down costs, he looks more to regulation. Whether his efforts will succeed in holding down costs is one of the great unknowns of the health care law that was Obama's signature legislative achievement.

The 2010 law includes a number of provisions designed to slow the increase in health care costs for Medicare and private health plans. The most important caps how much the federal government will pay hospitals and other providers in the future.

The law also includes initiatives to make care more efficient and reward providers that provide better care, rather than paying them for every doctor's visit or hospital stay. As a backstop, the law created the Independent Payment Advisory Board, a government-appointed panel that has authority to further cut payments to providers if Medicare spending increases too rapidly.

Supporters of the law argue that billions of dollars could be saved if doctors and hospitals would adopt the best practices already in use in some parts of the country.